On Wednesday 26th February, ECO-Buy’s General Manager, Cameron Neil, facilitated a discussion amongst South Australian network group meeting attendees on engaging local suppliers on sustainability performance. This topic is becoming increasingly important with the growing emphasis on doing business with local suppliers to support local economic development and employment objectives, as well as meeting organisational sustainability objectives through procurement.
What is local procurement?
There are many definitions of local procurement – for a local council it may be your municipality plus neighbouring ones. For the state government, as defined by the South Australian Government’s Industry Participation Policy, ‘local’ includes South Australia, other Australian states and territories and New Zealand.
Local procurement has typically focused on generating local employment outcomes. However, some organisations have particularly specified local manufacturing and production as part of the scope. These two different approaches are not always consistent with each other. For example, a national company moving in to an area may provide local employment opportunities, but at the same time put local SMEs out of business.
The Local + Sustainable Procurement Nexus
Local and sustainable procurement are related – as illustrated in the figure at left. Local procurement is typically pursued for local economic outcomes. However, it is being increasingly recognised that local procurement also drives social benefits through local employment and jobs, and thriving and prosperous communities. In some cases, local procurement can also deliver environmentally preferable outcomes, such as reduced transport impacts, closing the loop on waste, etc.
The Local + Sustainability Challenge
Many organisations, including those participating in our ECO-Buy Network Meetings, often find it a challenge to achieve both local procurement and sustainable procurement outcomes within the same purchasing event. For example, a common observation is that quite often it is larger, national or multinational businesses that can better respond to sustainability specifications or criteria, and offer sustainability credentials around their products or services. Local businesses tend to be SMEs.
A specific challenge raised in the meeting was the purchasing of sustainable or green products manufactured locally, i.e. wanting to support local manufacturing and/or production, but also wanting the most sustainable products in the market. This challenge is depicted in the diagram here.
Sustainable and local procurement strategies
Participants in our Network Meetings discussed some strategies for combining local and sustainable procurement approaches:
- Reconcile local procurement objectives with sustainable procurement objectives
Review corporate strategies and objectives to understand the emphasis your business places on local and sustainability outcomes. Translate these clearly in to your procurement policies and processes. For example, state clearly in your procurement policy the extent to which your organisation will favour local business over environmental priorities, such as life cycle impact and risk assessment.
- Work with local suppliers to help them as a business become more sustainable and offer more sustainable products and services
Your organisation may need to work alongside local suppliers to build their capability to be able to achieve your combined local and sustainability objectives. This could involve enhancements in the sustainability of their business operations, as well as assisting them to improve the sustainability of their product or service. There are likely up-front costs associated with such an approach, but the long term pay-off for building local and sustainable businesses may be worth it.
Some practical steps towards these 2 strategies are outlined in the table below.
How far do we go to understand sustainability impacts of goods/services provided by local suppliers?
A specific question raised in our meeting was how far upstream or downstream the supply chain you want or need to go with local suppliers when assessing how sustainable the product or service might be.
For example, a business was sourcing garments for its employees from businesses local to their production facilities, as part of their commitment to benefiting the community through procurement. When international attention was brought to bear on garments manufactured in Bangladesh, the business realised they did not have full transparency over the supplier's upstream supply chain (ie, where the garments were made). This put the business at risk.
Getting information from suppliers on their upstream supply chains can be difficult, especially for SMEs with no leverage over their suppliers to obtain such information.
In the meeting, 3 approaches were discussed to obtain information on upstream supply chains, or to ensure key sustainability risks are managed:
- Radical transparency
There is a trend towards businesses offering consumers insights in to the production and manufacture of goods, such as t-shirts and free range eggs. This is still a very small percentage of suppliers, but as costs of technology come down and consumer expectations change, there is anticipation that radical transparency will become more widespread.
- Eco labels
For some goods, independent, third-party certified sustainability labels provide valuable information on the upstream supply chain. This includes catering goods, electronics, garment, timber, and paper.
- Supplier capability building
While there are tools to provide some information on the sustainability of the supply chains of goods and services provided by suppliers, there is no replacing relationships with suppliers who are able to provide the information your organisation wants. This may require capability building from your organisation to improve the supplier’s understanding and processes. For some areas of goods and services, having capable suppliers may be your only way of managing supply chain risks. Some tips for capability building are in the table below.
Example – Moira Shire and Greater Shepparton City Council project on greening local supply chains
Moira Shire Council and the Greater Shepparton City Council partnered on the ‘Greening Local Supply Chains for Local Governments’ (GLSC). The aim of the project is to increase their capacity to supply green products and services as well as greening their business operations. Moira Shire Council and Greater Shepparton City Council commissioned ECO-Buy to engage with suppliers in the local council region to better understand how suppliers are managing environmental aspects related to the products and/or services they provide, and explore opportunities for introducing greener local products and services.
ECO-Buy helped Moira and Shepparton councils to identify significant opportunities for local business to be involved in supplying sustainable goods/services. This project was funded with the support of the Victorian Government under the Victorian Adaptation and Sustainability Partnership - formerly known as the Victorian Local Sustainability Accord. Guidance developed as part of this project will be made available soon.
- Chartered Institute of Purchasing and Supply (CIPS) knowledge summary and opinion on using local suppliers:
- Infographics on the impacts and benefits of using local makers and suppliers: > http://www.upworthy.com/why-you-should-shop-at-places-where-you-can-yell-at-the-owner
- Grow Northumberland UK example of a comprehensive local procurement initiative that aims to support local business, the community and the environment:
- The following excerpts from Mount Alexander Shire Council’s Procurement Policy highlight how local procurement can be integrated into a mainstream procurement policy, and linked to social procurement: > http://www.mountalexander.vic.gov.au/files/Procurement_policy_2013.PDF